India's RBI needs to diversify its new Fintech regulatory working group

The Reserve Bank of India (RBI) has formed an inter-regulatory working group to address the regulatory issues relating to fintech and digital banking in the country. This is a welcome step in the right direction, in line with recommendations by Kapronasia in its recent report titled: ‘Fintech Regulation in Asia’.

The working group’s mandate includes assessing the risks and opportunities for fintech in India and examining international best practices. The first report by the group is expected to be out within six months of the first meeting, the RBI said in a statement on its website.

Even as the group’s creation is a positive move, it is worth noting the composition and leadership of the working group. Its founding members are primarily from the financial services industry. Even as the RBI allowed the working group to co-opt entities from the telecom, payments, software and start-up ecosystem, the market’s expectation was that the working group would already have such representation.

The market had also expected the group to be led by the Indian government. Presently, the RBI is at the helm. A government-led group would have allowed a dynamic and fast evolving ecosystem like fintech to avoid being boxed in by the RBI – an institution considered overly conservative.

In both respects, India may wish to take a page from Hong Kong and Australia’s playbooks. In Hong Kong, the Steering Group on Financial Technologies is headed by the Treasury, with help from other government departments. Membership is also diverse. The city’s central bank (HKMA), the Securities and Futures Commission, and institutions such as HSBC (banking), Boyu Capital (venture capital), HongKong Cyberport Management Co (internet), Alipay (payments), Vanguard Investments (private equity), Accenture (consulting) are also members. The working group in Australia has an equally diverse set-up. Its representatives come from both government and industry, and even include members from the Attorney General’s Department for anti-money laundering inputs and from the Transaction Reports and Analysis Centre.

Both efforts have paid off with Hong Kong and Australia considered to be top Asian Fintech destinations. The RBI must take note.